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Louis DeGidio, Inc. v. Industrial Combustion, LLC

United States District Court, D. Minnesota

December 18, 2019

LOUIS DEGIDIO, INC., LOUIS DEGIDIO SERVICES, INC., JAMES DEGIDIO, and MICHAEL DEGIDIO Plaintiffs,
v.
INDUSTRIAL COMBUSTION, LLC, and CLEAVER-BROOKS, INC., Defendants.

          Trevor R. Walsten and David A. Brandis, for plaintiffs.

          Ann M. Maher, for defendants.

          MEMORANDUM OPINION AND ORDER ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

          JOHN R. TUNHEIM CHIEF JUDGE

         Plaintiffs Louis DeGidio, Inc.; Louis DeGidio Services, Inc.; James DeGidio; and Michael DeGidio (collectively, “DeGidio”) brought suit against Defendants Industrial Combustion, Inc., and Cleaver-Brooks, Inc., (collectively, “IC”) based on IC's termination of a 60-year business relationship between DeGidio and IC. DeGidio brought claims for breach of contract, fraud/misrepresentation, negligent misrepresentation, estoppel, tortious interference, and unjust enrichment. DeGidio claims that because it is a franchisee, it is entitled to the protections of the Minnesota Franchise Act. DeGidio has moved for a Preliminary Injunction, requesting that the Court enjoin IC from terminating the business relationship. The Court will deny the Motion.

         BACKGROUND

         DeGidio[1] is a distributor for IC, which manufacturers burners that are used in boilers. (Am. Compl. (“FAC”) ¶ 9, Dec. 2, 2019, Docket No. 40.) The parties and their predecessors-in-interest have had a business relationship for approximately 60 years. (Id. ¶ 4.) The parties' relationship has been governed by a series of agreements. The most recent written agreement is from 2007. (Id., Ex. B (“2007 Agreement”) at 5, Dec. 2, 2019, Docket No. 40-1.)

         I. THE 2007 AGREEMENT

         As relevant to this dispute, the 2007 Agreement contains the following terms:

Term: “The Term of this Agreement shall be for three years, beginning on the 15th of November, 2007, unless terminated as provided for herein.” (2007 Agreement ¶ 2.)
Merger: “This Agreement represents the entire agreement between IC and Louis DeGidio Inc., the Representative, and all previous agreements (if any) are hereby terminated. No change, alteration or amendment of this Agreement shall be valid unless in written form, and executed by both parties.” (Id. ¶ 18.)
Minimum stock: The Agreement requires DeGidio to maintain “minimum stock at its place of business for efficient sale, service and repair of I.C. products. (Id. ¶ 4)
Termination: “This Agreement may be terminated or cancelled by either party without cause with sixty-day written notice. The notice must be sent by Certified U.S. Mail by one party to the other, at their currently known address, and shall include the exact date of termination.” (Id. ¶ 16.)
Training: “I.C. will assist in the training of the sales and service personnel of the Representative. Training shall be limited to the operation and application of I.C. products, or other training, which from time to time, may be deemed as necessary by I.C. and within related phases of the industry.” (Id. ¶ 5.)

         The 2007 Agreement does not use the term franchise and does not reference any franchise fee. IC has not filed any franchise paperwork with the State of Minnesota. (Aff. of David Brandis ¶ 3, Oct. 11, 2019, Docket No. 9.)

         II. PARTIES' CONTINUED RELATIONSHIP POST-2010

         Although the 2007 Agreement expired by its own terms in 2010, the parties continued their distribution relationship until 2019. In May 2019, IC reached out to DeGidio to discuss sales targets, and sent DeGidio a sales target letter proposing that DeGidio aim for $100, 000 in sales for fiscal year 2020. (Decl. of Kevin Pheney (“Pheney Decl.”) ¶¶ 20-21, Nov. 1, 2019, Docket No. 27.) After several attempts to meet in person, the parties eventually met to discuss plans on August 15, 2019. (Id. ¶¶ 25-26.) During the meeting DeGidio declined to increase its territory to the entire state of Minnesota but agreed to the proposed sales target. (Id. ¶¶ 27-28.) However, by September 3, 2019, DeGidio had not returned the signed sales target letter, despite IC's repeated requests. (Id. ¶¶ 30, 32.) That day, IC gave DeGidio 30 days' notice of termination. (Id. ¶ 33.)

         DeGidio filed its initial Complaint, seeking declaratory judgment and bringing claims for breach of contract, fraud/misrepresentation, negligent misrepresentation, estoppel, tortious interference, and unjust enrichment on October 10, 2019. (Compl. at 13-25, Docket No. 1.) DeGidio filed its Motion for a Preliminary Injunction on October 11, 2019. (Docket No. 6.) On October 17, 2019, IC withdrew its initial September 3, 2019 notice, and instead issued a new 60-day notice of termination, effective that day. (Pheney Decl. ¶ 34.) On December 2, 2019, while this Motion was pending, DeGidio filed an Amended Complaint, adding Cleaver-Brooks, Inc., as a defendant, and adding two additional claims for violations of the Minnesota Franchise Act and for Controlling Person Liability. (FAC at 1, 26-27.) DeGideo is now seeking to enjoin IC from terminating its business relationship with DeGideo while this litigation unfolds.

         DISCUSSION

         I. LEGAL STANDARD

         Whether a preliminary injunction should issue turns upon: (1) the probability of the movant succeeding on the merits; (2) the threat of irreparable harm to the movant; (3) the balance between this harm and the injury the injunction will inflict on the non-movant; and (4) the public interest. Dataphase Sys. Inc. v. CL Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc). For a preliminary injunction, the “question is whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined.” Id. “It frequently is observed that a preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the ...


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